- February 9, 2011
“If you want to blame somebody, blame whoever turned the stock market upside down. Our investments didn’t pan out. But your plan is sound as long as the employer — the town — makes its contribution every year, which it has always done without fail.”
Longboat Key firefighter pension board attorney
So the plan is sound as long as taxpayers keep paying up … “which it has always done without fail.”
Those words may become haunting.
But before we get to the details involving Longboat Key’s employee pension quagmires, what’s wrong with this picture:
1) Longboat Key taxpayers are ultimately responsible for the fiduciary soundness of the firefighters’ defined-benefit pension funds. If there’s a shortfall in the fund — also known as an unfunded liability, or not having enough money to pay the promised benefits — Longboat Key taxpayers are contractually obligated to pay up and make up the difference.
2) The firefighter pension board, which oversees the management of the pension funds, has five members. Three of them are firefighters; two are Longboat Key taxpayers. In other words, the beneficiaries of the pension fund control its oversight; taxpayers have no control.
3) The lawyer for the pension board is also the lawyer for the Longboat Key firefighters’ union.
Call us naive about pension plans, but there’s something squirrelly about those arrangements.
But there is nothing squirrelly about the table at left. There are a lot of numbers in that table. We reprinted all of them so you could see the progression from 2001 to 2008, the latest year of data published in the town’s 2009 comprehensive annual financial report.
In seven years, the unfunded liabilities that taxpayers eventually must cover has risen from $709,322 to $22,766,014 — 3,109%.
Longboat taxpayers, meanwhile, have paid $8,696,797 since 2001 to fund the legally required amounts to keep the pension funds in compliance with the ordinances that set them up.
As this table clearly shows, in spite of steps the Town Commission took a few years ago to spread out payments over a 30-year amortization period, the town’s future obligations continue to get worse.
The town’s defined-benefit pension plans are a growing disaster for taxpayers, and the Town Commission appears to believe there is no sense of urgency to address them.
Here’s a good rule: When in a hole, the first rule is quit digging. Longboat taxpayers can bond themselves out of this hole now and convert to defined contribution-like 401k plans, or they can keep digging that liability deeper and bond themselves out of a larger debt later.
LBK's PENSION SNAPSHOT
The following table shows the unfunded liabilities in the town’s pension plans. This is the amount of money that is lacking to meet the pension plans’ future obligations. Taxpayers eventually will have to make up the difference.
Police Firefighters General
2001 ($18,049) $209,462 $517,909
2002 2,635,930 5,743,553 3,548,442
2003 1,801,018 5,729,719 3,056,679
2004 2,078,852 7,150,130 3,405,678
2005 2,550,573 8,050,808 3,682,845
2006 2,618,341 9,462,363 3,743,447
2007 4,503,557 12,575,616 4,160,432
2008 5,335,987 12,425,693 5,004,334
The following table shows the amount Longboat Key taxpayers have contributed to make up annual pension contribution and investment shortfalls.
Police Firefighters General
2001 $121,834 $272,323 $151,246
2002 234,373 457,349 355,731
2003 276,040 624,523 377,075
2004 163,651 299,536 412,014
2005 102,620 346,748 380,983
2006 126,834 358,128 414,964
2007 222,256 290.827 429,684
2008 353,986 797,183 400,059
2009 350,424 616,355 477,516
* Most recent data available Source: 2009 CAFR
To view a PDF of this chart, click here.